Can GOOG pass this test?
I’ve been about as
bullish as they come on Google
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In fact, it doesn’t seem that long ago that GOOG was sitting at 280 and I was
telling you that the run to 480 was only half-way over.
Now here we sit at 410/share (a mere 17% from my
480 target) and the stock looks like it may be starting to find some trouble. In
fact, if you take a look at this 20-day chart on GOOG you will see why I say
that Friday’s action could be extremely important in determining if GOOG will
continue to skyrocket or begin a major pullback:
Google has entered into a descending triangle
formation. This occurs when a stock makes a series of lower highs, with bounces
off of a horizontal support line in between. On GOOG this support line is right
in the 399-400 range.
Notice how the stock is currently sitting right
at the descending line that connects the series of lower highs. This is why
Friday is a potentially pivotal day for Google as well as
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Basically, one of two scenarios will occur on
Friday:
1) The stock will move lower, confirming the
validity of the descending triangle and the associated bearish outlook. In this
scenario, we will begin watching for opportunities to enter bearish options
spreads or short sell GOOG in the next couple of weeks. Be especially mindful of
a high-volume move (and hold) under 399 over the next week or two, as this would
indicate a major breakdown is starting.
2) The stock will move higher, essentially
eliminating the descending triangle and affirming the strength of the 399-400
support level. In this scenario we will keep our bullish positions in tact and
look to add on low-volume dips to near the 400 support level.
At DaytradeTeam, we’ve had some very good success
day trading GOOG in our Live Trading Room over the last year, and we expect that
to continue well into 2006. For the mid-term however, now is the time for GOOG
to either make a stand or pullback—and thanks to technical analysis we’ll be
ready for either!
Andy Swan
Andy Swan created and
co-founded DaytradeTeam five years ago on a principle of empowering
individual stock and options traders with the techniques and analysis methods
typically reserved for elite professionals. His expertise in technical analysis
and commitment to educating members earned DaytradeTeam a top-ranking among
advisory services for several years.